A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.
A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.
The journal entry recorded in the general journal (as opposed to the sales journal, cash journal, etc.).
Approximate amounts. Accountants use estimates for depreciation expense, warranty expense, bad debts expense, monthly accruals for utilities, bonuses, income taxes, etc. Also see change in accounting estimate.
Also referred to as manufacturing overhead, indirect manufacturing costs, factory burden, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
Financial Statements Video Training Part 3 Balance sheet: prepaid expenses; current assets; investments; property, plant and equipment Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform...
See Explanation of Inventory and Cost of Goods Sold.
A loan from a bank or other lender in which the borrower has pledged an asset as collateral in case the loan cannot be repaid in full.
An indicator of profitability that is measured by dividing the accounting net income by the amount invested.
The Roman numeral that represents 1000. Other symbols that are sometimes used to represent 1000 include k and m. (Note: Sometimes M is also used to indicate million.)
A bond issued with a series (or staggering) of maturity dates.
A written opinion of an independent certified public accountant that a company’s financial statements are a fair representation of the company’s financial performance and financial position. The...
A net debit balance for the total amount of owner’s equity. It is the result of the reported amount of liabilities exceeding the reported amount of assets.
A contra asset account arising when the present value of a note receivable is less than the face amount of the note. The credit balance in this account will be amortized to interest revenue over the life of the note.
Federal government securities with a fixed interest rate and maturing in 10 years or less.
This organization oversees the Financial Accounting Standards Board (FASB). It selects the members of the FASB and raises funds to assist in paying for its operations.
Financial Statements Video Training Part 12 Statement of cash flows: introduction, cash flows from operating activities Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
The amount that a recurring equal amount deposited at the end of each period will grow to under compounded interest. An ordinary annuity is also known as an annuity in arrears.
In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
This is the expression for replacement cost, which is not an acceptable cost flow, since it violates the cost principle. However, an economist and decision makers would argue that the cost to replace the item is the...
The gross purchases of merchandise for resale minus purchase returns, purchase allowances, and purchase discounts.
A cost that has been recorded in the accounting records and reported on the balance sheet as an asset until matched with revenues on the income statement in a later accounting period.
A term used in break-even analysis to indicate the amount of sales that are above the break-even point. In other words, the margin of safety is the amount by which a company’s sales could decrease before the...
The cash flow from operating activities minus the amount of capital expenditures. Other variations are also used. To learn more, see Explanation of Cash Flow Statement.
See deferral-type adjusting entry.
The operating activities of a company, excluding the major segments of the company that are being discontinued.
The result of dividing a corporation’s net income by the average amount of common stockholders’ equity during the time interval when the net income was earned. To learn more about this ratio, see Explanation...
An effort to have materials delivered by suppliers just as the materials are needed, thereby eliminating the need for the buyer to store inventories of component parts. Obviously, the buyer is relying on the...
A retirement plan that specifies the amount that a retiree will receive, such as 1% of the person’s recent salary times the years of service. The employer’s obligation is to contribute enough money to meet...
This current liability account reports the amount a company owes (is required to remit) for its employees’ 401(k) program as of the date of the balance sheet.
of the transactions that should be recorded in each of the accounts. The chart of accounts can be expanded to accommodate new types of business transactions. The chart of accounts will not include the account balances...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
See Statement of Financial Accounting Standard No. 121. Under this standard if the undiscounted future cash flows from the asset (including sale amount) are less than its carrying amount, a loss is recognized. The amount...
This current liability account will show the amount a company owes for items or services purchased on credit and for which there was not a promissory note. This account is often referred to as trade payables (as opposed...
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for more than the amount shown in the company’s accounting records. The gain is the difference between...
The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
One of the types of adjusting entries that are made at the end of the accounting period in order to report (1) revenues that have been earned but have not yet been entered into the accounting records, and/or (2) expenses...
The acronym for Institute of Management Accountants, an international organization dedicated to enhancing management accounting and financial management. It offers various programs and networking opportunities. IMA also...
This indicates (on average) how many days of credit sales have not yet been collected. If the credit terms are net 30 days, you would expect this to be at least 30 days. To learn more, see Explanation of Financial...
The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the...
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